I was impressed by Ellen's statement this morning, but I wonder how much
of the money invested in U.S. stocks and bonds is at risk from flight back
to its original source in say, Europe or Japan? How much flight would be
required to spook the financial markets? Couldn't a relatively small
amount spark a panic?
Any ideas?
On Wed, Jul 18, 2001 at 09:05:03AM -0700, Jim Devine wrote:
> Ellen wrote:
> >I have to disagree with the proposition that the US
> >current account deficit might presage flight from
> >the greenback, capital outflows and financial collapse.
> >Though the scenario is plausible on the surface, it
> >overlooks one thing. Increasingly, the world's wealthy
> >count their wealth in dollars.
>
> I agree: much more likely that a flight from the greenback is a simple but
> quick fall in its value. For example, the real trade-weighted major
> currency index for the dollar fell more than 20% from 1985 to 1986 and more
> than 11% from 1986 to 1987. I don't think that this would involve a
> financial crisis (or "collapse") as much as a stagflationary shock.
>
> Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
>
--
Michael Perelman
Economics Department
California State University
Chico, CA 95929
Tel. 530-898-5321
E-Mail [EMAIL PROTECTED]
